Inheritance Tax is a taxation which may be paid on your estate (your money, possessions, and your share of any property) when you die, reducing how much value will ultimately pass to your beneficiaries. Your beneficiaries are the people you want to leave your money and assets to when you die.

There’s normally no Inheritance Tax to pay if either:

IHT is currently applied to estates worth more than £325,000 – though this threshold is likely to change in future. When the value of your estate exceeds the limit, known as the ‘nil-rate band’, everything over the threshold is taxed at 40% (unless you’re leaving it to your surviving spouse, in which case no IHT needs to be paid).

For example:

Your estate is worth £500,000 and your tax-free threshold is £325,000. The Inheritance Tax charged will be 40% of £175,000 (£500,000 minus £325,000).

Your executor (or executors) plays a key role in helping to organise and manage your estate, by bringing together all administrative aspects and finalising the financial matters. This tends to be a significant undertaking involving tasks including closing bank accounts, dealing with any pensions, paying necessary taxes, and selling or transferring investments or property.

Unlike a Will, which only comes into effect after you die, a trust comes into effect once it has been enacted. Though there are many different types, a trust generally is a legal relationship, represented in a legally binding document, in which you (the settlor) put assets into a trust for a beneficiary/beneficiaries (the person(s) who benefits from the trust) and appoint trustees to manage the trust. These trustees implement your wishes on your behalf after you die.

Once an individual dies their Will (which must have been ‘proved’ in a court of law), will go into probate. This is where the executor of the Will, will apply to get a ‘grant of representation’ or a ‘grant of probate’ to access the estate of the deceased person and distribute it according to the Will. An individual can apply for the grant of probate, as can a solicitor on an individual’s behalf, or an external person licensed to provide a probate service.

Lasting Powers of Attorney (also known as LPA) came into effect in 2007, replacing former Enduring Powers of Attorney (EPA), which were quite restrictive. The Lasting Power of Attorney was created to meet an individual’s needs ahead of time, when they may no longer be able to look after their own affairs – personal or financial. A Lasting Power of Attorney allows an individual to make arrangements for family or friends to make decisions on their behalf, should they no longer be able to do so e.g. they lose mental capacity.

At Abacus Wills and Trusts, we pride ourselves in being one of the UK’s leaders in writing Islamic Wills (also known as Sharia or Shariah Compliant Wills) for our Muslim clients. Under UK law, the only way to ensure that your estate is distributed according to Sharia, is by having a valid Islamic Will in place.

As we get older, we are more likely to suffer from disabilities and chronic health conditions so subsequently we need more health and personal care. That’s why it is important to plan ways to finance any future care fees as early as possible. If you plan in advance, there are a number of steps you can take to finance care home fees without having to necessarily sell your property. 

It is now a requirement that certain trusts are registered such that HMRC have details of the beneficial ownership. Although this has taken several years to bring about, but the deadline for such registration has now been set as 1 September 2022.